NetSuite CEO Zach Nelson: 'Pure cloud' strategy pays off

NetSuite's third annual conference opened in San Jose today with a keynote speech from CEO Zach Nelson that featured customer stories, new product announcements and some outspoken criticism of the opposition, notably SAP.

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NetSuite's third annual conference opened in San Jose today with a keynote speech from CEO Zach Nelson that featured customer stories, new product announcements and some outspoken criticism of the opposition, notably SAP.

NetSuite is a cloud-based financial and ERP solution that is, according to Nelson, on track to generate US$100 million in revenue in the next financial quarter (first quarter revenue was $91.6 million).

Nelson says NetSuite has 700 partners and 2000 employees globally and posted a $19.1 million profit in the past financial year. The company, which began in 1998, has around 16,000 customers.

On the eve of the conference, Gartner named NetSuite the fastest growing financial management services (FMS) vendor globally, and "the only pure cloud company among Top 15 global FMS vendors".

Attendee numbers at SuiteWorld -- the name given to NetSuite's annual conference - are also on the rise. The first conference attracted 1200 attendees, last year's number 3000, and this year 5000 customers, partners, media and analysts are present.

During his 90-minute keynote speech Nelson said the company had signed some large enterprise customers, demonstrating how NetSuite is moving up the food chain. The most significant is Qualcomm, the chip manufacturer, which has 26,000 staff worldwide.

Another new customer is Williams-Sonoma, a US$4 billion revenue retailer based in the US. It signed with NetSuite for its expansion into the Australian market with brands Williams-Sonoma, Pottery Barn, Pottery Barn Kids, and West Elm. The multi-channel retail and business management platform was deployed in three months and the Australian stores and websites opened to the public two weeks ago.

New partnerships were also announced, notably Capgemini which has offices and operations in 44 countries and recently returned to New Zealand when it picked up an IRD contract. Another partnership with Autodesk, a provider of cloud-based design and engineering software, heralded NetSuite's move into cloud-based ERP solutions specifically for the manufacturing sector.

In the press release announcing the Autodesk partnership, Nelson takes aim at arch-competitor SAP, claiming that "while SAP is busy talking about database technologies that are irrelevant to manufacturers, NetSuite is investing in next-generation cloud application solutions".

"To be a hero you have to have an anti-hero -- SAP fill that role with," Nelson told the audience during his keynote (the conference theme is heroes).

But it didn't all go according to script. During the on-stage interview with Qualcomm CIO Norm Fjeldheim, he said: "If I was Oracle and SAP I'd be really worried."

The audience laughed - Oracle founder Larry Ellison is the largest shareholder in NetSuite -- and Nelson shrugged: "Well, SAP maybe," he replied.

Local context

After the keynote speech, Computerworld asked Ben Kepes, an international consultant on cloud computing based in New Zealand, to provide some local context. He's attended all three NetSuite conferences, so the first question was, so the first question was, why openly criticise the opposition?

"In the IT industry there is a lot of smoke and mirrors and there is a lot of testosterone and there's a lot posturing and positioning. Part of this is positive, in terms of partnerships and those sorts of things, but part is really negative in terms of crucifying your competition and that's what we saw today" Kepes says.

Kepes noted that in the past, Microsoft has also come in for criticism, but it was only mentioned once today. "Maybe because Microsoft are less and less relevant, and SAP still is."

NetSuite appears focussed on growing revenues, while at the same time delivering a comparatively lower profit to shareholders. In New Zealand, the cloud-based publically listed company Xero is adopting a similar strategy. So what is the rationale?

"The technology industry is all about building scale as quickly as possible and then being acquired, because you become important. Profitability is secondary to growth and as long as you are sustainable, as long as your shareholders are happy, and as long as you are growing to point that you become valuable to an acquirer, then it's all good," Kepes says.

"Seeing the reaction to Xero's strategy of growth and not profit has been a good example of the fact that in New Zealand we aren't used to a different way of looking at things."

Kepes describes the investment industry in New Zealand as "unsophisticated", although he notes that more tech companies are listing, or talking about listing.

"The thing that goes with that is we need to develop more maturity and our investors need to understand technology ecosystems and the life cycle of technology companies,"Kepes says.

Although Kepes points out that there are lots of initiatives trying to give New Zealand companies exposure to what the reality is on the global stage.

"We're missing good governance and if you look at the Institute of Directors and the make-up of the boards of our publically listed companies, apart from a few exceptions, it's pretty limited in terms of understanding this new world."

When governance and analysis of the technology sector improves, Kepes says the investing public will become more mature and "it all starts cycling from there."